Arbitrage Trading: Pros and Cons
Arbitrage trading has small risks and stable returns. For large funds, if unilateral heavy positions intervene, they will face higher holding costs and greater risks. On the contrary, if unilateral light positions intervene, although risks may be reduced, the opportunity cost is, Time cost is also higher. Therefore, it is difficult to obtain a relatively stable and ideal return for large funds unilaterally heavy warehouses, or unilaterally weak warehouses to intervene in the futures market as a whole. However, if large funds intervene in the futures market with long and short two-way positions, that is, carrying out arbitrage transactions, that is, not only can they avoid the risks faced by unilateral positions but also may obtain relatively stable returns. Now, let's take a look at the advantage of doing an arbitrage trading. Advantages of Arbitrage Trading Lower volatility . Since arbitrage trading obtain...